The coming week is set to be shaped by high-profile U.S. employment and inflation releases, another round of technology earnings after sharp sector swings, and contrasting political developments in Japan and the UK. Below are the key themes likely to steer markets in the days ahead.
1. U.S. labour report under the microscope
The main economic highlight will be the long-awaited release of U.S. January employment data, now scheduled for Wednesday after being delayed by a brief three-day federal government shutdown that ended last week.
Forecasts suggest the U.S. economy added around 70,000 jobs in January, compared with 50,000 in December. Investors will be closely examining the report for evidence that the labour market is “stabilizing,” a term recently used by Federal Reserve Chair Jerome Powell.
The Fed cut interest rates several times in 2025 to cushion a softening jobs market affected by tariff-driven uncertainty. Recent signals have been mixed: weekly jobless claims rose more than expected, partly due to severe winter weather, while job openings in December fell to a five-year low. The bulk of that decline occurred in professional and business services, which some analysts see as an early sign of AI-related pressure on white-collar employment.
2. Inflation figures take centre stage
Attention will also turn to U.S. inflation data due on Friday. The headline consumer price index for January is expected to ease to 2.5% year on year from 2.7% in December, while the monthly increase is forecast to remain at 0.3%.
Alongside employment, inflation sits at the heart of the Fed’s dual mandate, meaning both releases could play a decisive role in shaping expectations for monetary policy in 2026. Policymakers kept rates unchanged last month, pointing to a labour market showing signs of stabilisation and inflation that remains subdued, though still above the 2% target.
The data come after a volatile spell for markets, driven in part by worries over the disruptive potential of artificial intelligence in the software sector. Following a steep sell-off last week, U.S. equities bounced back on Friday.
Analysts at Capital Economics said they “suspect U.S. economic data this week might help investors’ nerves recover further[.]”
3. Tech earnings back in focus
A busy earnings calendar, particularly for technology companies, will also be in the background. Results are due from ON Semiconductor (NASDAQ:ON), Datadog (NASDAQ:DDOG), Spotify (NYSE:SPOT), Cisco (NASDAQ:CSCO) and Applied Materials (NASDAQ:AMAT).
These updates may offer new insight into an industry adjusting to the rapid rollout of advanced AI tools. Software stocks tumbled last week after AI startup Anthropic launched a new workplace plugin aimed at legal and administrative tasks, raising concerns about potential pressure on demand for traditional software products.
As a result, investors are likely to focus closely on management commentary around AI adoption, investment and longer-term strategy.
“[I]nvestors had a lot to think about following the extreme volatility from the last several sessions, including the huge rebound on Friday, which raises the question of whether the swoon (especially in tech) is over?” analysts at Vital Knowledge said.
“We think the recent market swings are simply the most visible manifestations of large structural changes that have been underway beneath the surface for months, specifically in tech and AI[.]”
4. Japan’s prime minister strengthens her hand
Beyond the U.S., Asian markets started the week higher after Japanese Prime Minister Sanae Takaichi secured a commanding victory in a snap election held over the weekend.
The election came just 110 days after Takaichi became Japan’s first female prime minister, making the outcome particularly significant. Reports indicate her Liberal Democratic Party captured a rare supermajority in the lower house, bolstering her political authority.
The result appears to open the door to increased public spending and tax cuts, underpinned by what many observers describe as a relatively stable political environment.
“Takaichi’s decision to leverage her popularity for her party turned out to be successful. The landslide victory will reinforce her responsible but expansionary fiscal spending and a more Japan-focused foreign policy. Risk-on sentiment will dominate the market for now,” said Min Joo Kang, Senior Economist at ING.
5. Political uncertainty grows in the UK
While Japan’s leadership emerges strengthened, political risk is rising in the UK. Prime Minister Keir Starmer is facing mounting scrutiny over the appointment of a senior ambassador linked to Jeffrey Epstein.
Over the weekend, Starmer’s chief of staff Morgan McSweeney resigned, taking responsibility for the decision to appoint Peter Mandelson as the UK’s ambassador to the United States. Newly released U.S. Justice Department files showed Mandelson shared government documents with Epstein, while Mandelson and his now husband received payments from the late American sex offender.
Markets are watching closely for potential fallout. If Starmer or UK Chancellor Rachel Reeves were replaced, “[t]he most likely longer-lasting influence is a loosening in fiscal policy that leads to higher gilt yields than otherwise and a weaker pound than otherwise,” said Ruth Gregory, Deputy Chief UK Economist at Capital Economics.
Leave a Reply